Why transaction PIN was a cause of agony for equity sellers last week

Some online stock brokerage platforms last week informed users that they may face issues with authorising stock sales due to a technical issue. This provided a trigger for an interesting conversation between two friends, Anthony and Laura.

Anthony: I couldn’t sell stocks on Monday morning. Net net, some trades got affected and I lost some money, yet again.

Laura: The house always wins, be it casinos, or the stock market in the short-term. I hope you know that.

Anthony: Ha-ha. I know, Laura you have booked huge gains in the market. So, spare me that fortune cookie wisdom.

Laura: Our short-term investor seems quite irritated. What happened mister speculator?

Anthony: It was a tragedy. The issue that many investors and I faced related to the TPIN or the transaction personal identification number. The TPIN is a 6-digit password to authorise a broker to debit the chosen stocks from a demat account with CDSL.

Laura: TPIN? What’s this new password?

Anthony: I will tell you. An investor’s authorisation to debit a demat account can be given in four ways including via the Electronic Instruction Platforms of Stock Brokers / Depository Participants (eDIS). The TPIN-based mechanism is for authentication of eDIS transactions by the depository. The system was set up earlier last year to prevent misuse of power of attorney (PoA) by brokers.

Laura: So, how does this work? And, if it’s a better system, why are investors in so much pain?

Anthony: Exactly my point. A TPIN will be generated by the depository for an investor wishing to avail eDIS facility and will be communicated to the investor directly. The investor will have to enter the same TPIN every time he executes an eDIS transaction. TPIN is sent to the mobile number and email ID of the investor registered with the depository.

Laura: So, let me guess. The TPIN was not coming through. Right?

Anthony: Sadly, yes. Investors like me who use the TPIN route to authorise debit of their holdings while selling their shares were hit hard. Since, we could not authorise the debit, we weren’t able to sell shares as the TPIN authorisation was failing. Later, some brokerages allowed clients to skip the authorisation until the issue got resolved.

Laura: If you notice, we have been witnessing such technical glitches quite often recently. Remember the trading outage in February 2020 that had lasted for several hours. Then, there are also those fat-finger or freak trades. With lakhs of new investors coming into the equity fold, thanks to the stock market rally, we need a system that can deal with such things better.

Anthony: Yes. Small investors like me will always be at the losers’ end. In the February 2020 NSE outage, too, I was blind-sided and lost money in some option trades. Thankfully, the regulator, SEBI has recently issued a framework to penalise market infrastructure institutions (MIIs), which includes stock exchanges, depositories and clearing corporations, for technical glitches. I hope MIIs are taken to task.

Laura: That is why, my friend, I ask you to be a long-term investor. When you can make lakhs and millions, why go after the thousands with so much tension via day trades.

Anthony: True. Point taken, guru-ji.